Survey: FX Traders Cite Liquidity as Top Daily Concern

The availability of liquidity is the biggest daily issue facing FX traders right now, according to a new survey by JP Morgan.

The survey results come from 200 of JP Morgan’s largest Institutional clients, with the majority being FX traders and the rest being rates and commodities traders.

In total, 40% of survey respondents cited liquidity availability as the biggest day-to-day issue facing traders in 2019, with 25% instead pointing to efficiency of process, 18% to best execution requirements and 17% to price transparency.

When asked what the most important criteria is when selecting a liquidity source, 72% said price consistency, 63% said the availability of pricing during volatile markets, 54% said execution quality and 37% said response times. Of much less concern were execution ratios and internalisation, which just 16% and 14%, respectively cited as the most important factors determining where they source liquidity.

The vast majority of survey respondents, 73%, said that the introduction of Mifid II at the start of 2018 has made the liquidity landscape at least slightly more challenging, and 11% said that it has made it significantly more challenging.

One interesting data point from the survey is the emphasis that respondents seem to be placing on the potential of artificial intelligence (AI) and machine learning to impact trading going forward. Looking over a 12–month horizon, 57% of respondents expect this technology to shape the future of trading, while this figure jumps to 61% over a three–year time horizon. By contrast, just 9% of respondents said that they expect blockchain to shape the future of trading in the next 12 months and 19% said that it will over the next three years.

The majority of respondents believe that AI and machine learning provides deep data analytics and optimises trade execution, whereas about half of them believe that this technology represents an opportunity to hone their trading decisions.

When asked what data services are the most important for supporting best execution, 72% of the survey respondents said having access to real-time data. After this, the responses were more evenly split, with 38% saying pre-trade transparency data was most important, 36% saying that transaction cost analysis (TCA) or best execution support was, 25% citing transaction data sharing, 23% assisted reporting for transaction reporting and 20% assisted reporting for post-trade transparency.

Predicted and real-time market conditions and key performance benchmarks were picked as the most useful data tools, with 63% and 54% of respondents voting for each. Trade type historical data and trade type performance data were the next two most popular data tools, with